Cocoa falls after testing resistance

General Comments: Futures closed a little lower on what was called speculative selling. Charts show that the market may have failed against some important resistance áreas. The flow of Cocoa from western Africa is falling and traders are taking note. Weather continues good in Africa and as some crop size estimates for next year start to increase. Ideas are that production in the coming year will be short, even with increased production ideas. Some buying has been seen in the next crop months because of these ideas. The market is trying to mount a seasonal rally now that the main harvest is over in Western Africa. Ideas are that current low prices should créate new demand and that the main crop harvest is over in Western Africa and much of Asia so that supplies on offer could also be less. The weather is forecast to be warm and somewhat wet in West Africa this week. For now, traders expect good mid crop production from West Africa, and wire reports said that the harvest started this week in Nigeria. Malaysia and Indonesia crops appear to be in good condition and weather is called favorable.

Overnight News: Scattered showers are expected in West Africa. Temperatures will average mostly above normal. Malaysia and Indonesia should see episodes of isolated showers. Temperatures should average near normal. Brazil will get mostly dry conditions and warm temperatures. ICE certified stocks are lower today at 4.626 million bags. LIFFE stocks are now 6,422 standard lots, 137 large lots, and 7 bulk lots.

Chart Trends: Trends in New York are mixed. Support is at 2110, 2075, and 2035 May, with resistance at 2170, 2190, and 2220 May. Trends in London are mixed. Support is at 1430, 1410, and 1400 May, with resistance at 1480, 1495, and 1520 May.

COTTON

General Comments: Futures were a little lower in consolidation trading. Traders expected bullish export sales data from USDA, but reacted more to disappointing economic news released early in the day. Some traders think that US planted area will increase from the estimates released last week due to more favorable Cotton futures prices and sinking Corn and Soybeans futures prices. Corn and Soybeans futures could show some stability for the short term after the dramatic price action over the last week. Weather will also be watched as more wet weather in the Delta and Southeast could create less interest in Corn and more in Cotton to avoid having Corn pollinate in the hottest time of the year. Demand ideas remain strong overall based on the strong export paces seen in the USDA reports in recent weeks and on reports of tight domestic and world cash markets.

Overnight News: The Delta and Southeast will see mostly dry weather except for rain over the next couple of days. Temperatures will average below normal this week and near to above normal this weekend. Texas will get dry weather except for a few showers in northern areas this weekend. Temperatures will average near to above normal by Friday and above normal this weekend. The USDA spot price is now 83.63 ct/lb. ICE said that certified Cotton stocks are now 0.421 million bales, from 0.422 million yesterday.

Chart Trends: Trends in Cotton are mixed. Support is at 87.80, 87.10, and 86.20 May, with resistance of 88.70, 89.80, and 90.25 May.

About the Author

Jack Scovilleis a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988. Jack writes daily commentaries - Morning Grains and Softs, in both English and Spanish and is regularly quoted around the world by news & wire services including Dow Jones, AP, Bloomberg, and Reuters. You can contact Jack by phone at (312) 264-4322 or by email at jscoville@pricegroup.com. Learn even more on our website at www.pricegroup.com.

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